Where Is Germany's Gold? (opens in new tab)

I lean towards the side that thinks that the central and money center banks (not faceless multinationals) are suppressing the price of gold via fractionally-reserved lending of physical gold. What would convince me that this is not the case would be a comprehensive audit of the Federal Reserve's books and gold holdings.

You?

Gold as a raw material is useful to a degree, just as diamonds are, but artificial scarcity [1] [2] and wild speculation create a mess of distortions.

[1] http://www.theatlantic.com/magazine/archive/1982/02/have-you...

[2] http://archive.wired.com/wired/archive/11.09/diamond_pr.html

The US did not have a Gold-backed dollar in practice. From 1933 onward, Executive Order 6102 was in effect, making it illegal for any individual to own more than 5 ounces of gold.

The majority of people living today have never lived in a time period where you could practically exchange dollars to gold. That's the true conspiracy. The Gold-standard arguably never even existed in the first place. (At least, from 1933 onwards)

I've been following the Gold bug sphere in 2006, 2007 and there's absolutely nothing new about these conspiracy theories. They have been pushing them ever since, and you haven't even scratched at Bilderberger/Illuminati/Jews/Take your influential minority.

Banks still hold gold, they do so while ignoring other precious substances. Maybe it is a barbarous relic.

But some of the vaults this stuff is held in... they've got much less of it than was believed. Where is it? Why is no one concerned? Why are there no plain and verifiable answers forthcoming?

Not sure about the narrative you describe, but it's a clear fact that it's harder and harder to buy gold anonymously, without declaring to the State where you stash it. Makes it practical the day they come to get it back and give you worthless paper instead.

The Depression proves that the gold standard doesn't work. There was no stability; there was deflation.

Since the concept behind the gold standard means "gold always..." - a universal quantifier, one needs only show a counterexample to blow it out of the water.

You mean the same bankers, economist and politicians of the bail out to big banking institutions?

You mean the same bankers, economist and politicians of the too big to fail?

the same bankers, economist and politicians that have brutally increased their wealth in the crisis while the people income has gone deep down?

You need to insult people that disagree with you, calling them "bugs".

This is a big part of why the price of gold moves the way it does. It's not that the value of currencies changes compared to gold, which is the unmoving reference point. Instead, what's going on is that peoples' trust in paper currencies fluctuates, which changes their desire to hold gold as an alternative.

If you do believe that the NY Fed, the Bank of England, and the Bank of France are "above reproach," then your argument is absolutely correct. But if you can't be sure of that—and this article is definitely attempting to cast doubt on that—then there's the usual argument about self-hosting. Amazon's probably a better sysadmin than most people are, but you're the only sysadmin that you have meaningful control over the competence of.

Amazing book, by the way. I would also highly recommend the whole Baroque cycle.

He didn't say that fiat currency is a fiction, he said that he is worried that the world economic system might be built on the fiction of fiat currency.

Since you can print fiat, it's entirely possible in this current fractional reserve system that most fiat's employ to create a lot of artificial wealth.

Just because he's pointing out there could be a bubble doesn't automatically mean he ascribes 0 value to a US dollar, he just won't put his life savings in it.

> This rarely changes anyone's mind

Mainly because it's a dumb strawman.

> but I hope I can at least raise the contradiction to the top of their minds.

I really can't see the contradiction in thinking that there is a bubble in currency and still believing that said currency still has value in the current.

> All currencies are backed by our willingness to accept them, and that is the only backing that any currency ever needs.

Until people aren't willing due to inflation through debasement.... Thats the point....

> So why would they take a fiction over a real shirt that that gives them real value?

Because they can nearly immediately exchange the $500 (fiction) into something of real value (gold).

What's the value of the shirt? That depends on a lot of things that aren't known to you, and might not be known to them: how long will it last? how versatile is it? what would it cost to find an equivalent shirt, or to resell it? etc. These things are also ambiguous at a clothing store, although less so. But what is clear to both you and the goldbug is that it's clearly and obviously worth much less than $500: you're willing to estimate a rough value, even though neither of you can't put an exact number on it.

The goldbug ought to be complaining that everyone looks at a five-hundred-dollar bill and thinks that it's clearly and obviously worth exactly $500.00. That is tied into a lot of things, including, like the shirt, how long it will last and what it can be exchanged for, and neither of you know these things for sure.

With our worldview and assumptions, you and I might conclude that the bill is definitely worth at least $495: the chance of government collapse or a run on the banks, even over the next several years, is much less than one percent, and we can expect to use the bill before inflation devalues it by one percent. The goldbug, with their worldview and assumptions, might conclude that the value is fuzzier and possibly as low as $400: maybe there's a 20% chance of a run on the banks in the next few years. That still makes it worth obviously more than the shirt.

So the goldbug shouldn't be arguing that the money is unbacked and valueless, and you're right that things (including bills) are worth what people think they're worth. The goldbug should be arguing that we as a culture are overvaluing the bill. (And normal people do make these calculations: ask anyone who travels frequently between two countries with different currencies whether they prefer to keep cash in one currency or the other. Even over such a small value, there's a good chance they'll have an opinion.)

Reading between the lines of this article, there's an argument to be made that the world's large banks are not 100% trustworthy, as we'd hope. Maybe they're 95% trustworthy, but we should be skeptical of the claim that they're "beyond reproach", and simple human error, let alone malice, can cause gold to be misaccounted. And if they're misaccounting mere bars of gold, what else are they misaccounting?

| All currencies are backed by our willingness to accept them...

This is true!

| ... that is the only backing that any currency ever needs

This is clearly false- just consider any currency that has experienced hyperinflation. Currencies backed by commodities are not subject to such troubles. Or consider the hidden tax of even nominal inflation caused by monetizing debt (ie, printing "mind backed" currency to pay debts). Such systems are essentially a transfer of wealth from the poor to the rich since poor people don't have access to financing/loans.

| So why would they take a fiction over a real shirt that that gives them real value?

Of course both the shirt and paper money have value, subject to supply and demand. But, the paper money tends to hold on to its value better when its backed by something more than the restraint of central banks.

Ok, relax, I'm a fan of fiat currency as much as anyone, but your argument is a bit off.

Most people who argue for a gold standard aren't debating some innate worth of money. They're generally arguing that a backed currency restricts the government's ability to simply print money and create out of control inflation, which has actually happened many times.

My response to that would be that our democratic system has created a sufficient dis-incentive to do that and the fact that we haven't yet is sufficient proof that it works.

That said, I try not to keep my assets too liquid. Oh well =)

They took a small short-term risk to increase their tangible goods by 300%.